- CFA Exams
- CFA Level I Exam
- Study Session 7. Financial Reporting and Analysis (2)
- Reading 21. Understanding Income Statements
- Subject 7. Earnings per Share
CFA Practice Question
The ZZT Company went public on June 1, 2014 by issuing 25 million shares of common stock. In 2015, the firm raised additional capital by issuing 2 million shares of preferred stock. What is the weighted average number of common shares outstanding for the year ending December 31, 2015?
A. 14,583,333
B. 15,750,000
C. 25,000,000
Explanation: The weighted average number of common shares outstanding is the number of shares outstanding during the year weighted by the portion of the year they were outstanding. Since no new common shares were issued in 2015 and there were 25 million shares at the end of 2014, there are 25 million shares at the end of 2015. Note that the preferred stock shares do not affect the common shares outstanding.
User Contributed Comments 4
| User | Comment |
|---|---|
| adansaenz | Tricky question, it appears that CFA type questions are a subject of careful reading rather than financial knwledge :p |
| JeremyMartin | The shares were issued on June 1, 2014. Should the number of shares on Dec 31, 2014 be 25M x 7/12 = Answer A? |
| charlie | JeremyMartin: but the question asks the # of shares in 2015 though. |
| JeremyMartin | thanks for the explanation. i got the question wrong. hehe |